Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The cost of producing one additional unit of a good or service
B
The total cost of production divided by the number of units produced
C
The fixed costs associated with production
D
The variable costs that change with production volume
Understanding the Answer
Let's break down why this is correct
Answer
Marginal cost in economics refers to the additional cost of producing one more unit of a good or service. It helps businesses understand how much extra money they need to spend when they decide to increase production. For example, if a factory makes 100 toys for $1,000 and then decides to make one more toy for an additional $10, the marginal cost of that toy is $10. Understanding marginal cost is important because it allows companies to determine if producing more is worth the extra expense. By analyzing these costs, businesses can make better decisions about pricing and production levels.
Detailed Explanation
Marginal cost is the extra cost of making one more item. Other options are incorrect because This answer talks about average cost, not extra cost; This option refers to fixed costs, which do not change with production.
Key Concepts
marginal cost
Topic
Calculating Marginal Costs
Difficulty
easy level question
Cognitive Level
understand
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